2 10 mw biomass plant feasibility study final

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January, 2010

“Stewards of Our Traditional Lands” Kelly Lake, British Columbia

Feasibility Study for a 10 MW BiomassFired Power Plant

Prepared for:Kelly Lake Métis Settlement SocietyKelly Lake, BC

Prepared by:NuGen Engineering Ltd.

Richmond, BCDate:January, 2010


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TABLE OF CONTENTS

1

EXECUTIVE SUMMARY ................................................................................................................................ 1

1.1 I NTRODUCTION ................................................................................................................................................ 1 1.2 BACKGROUND ............................................................................................................................................. 1 1.3 PROJECT DESCRIPTION ............................................................................................................................. 4

1.4

BUSINESS PLAN / NEXT STEPS ................................................................................................................. 7

2

PROJECT OVERVIEW ................................................................................................................................... 9

2.1 COMMUNITY PROFILE – KELLY LAKE MÉTIS SETTLEMENT SOCIETY .......................................... 9 2.2 COMMUNITY BENEFITS .......................................................................................................................... 11

3 OBJECTIVES .................................................................................................................................................. 12

4 METHOD OF IMPLEMENTATION ............................................................................................................ 13

4.1 IMPLEMENTATION .......................................................................................................................................... 13 4.2

WORK PROCEDURES ................................................................................................................................ 14

5

BC HYDRO 10 MW POWER PURCHASE STANDING OFFER ......... ........... .......... ........... .......... .......... 15

5.1

INTRODUCTION ......................................................................................................................................... 15

5.2

KLMSS SMALL RENEWABLE ADVANTAGE ............................................................................................. 15

5.3 BC HYDRO STANDING OFFER ................................................................................................................ 16

6

BIOMASS FUELS ASSESSMENT .......... .......... .......... ........... .......... ........... ........... .......... ........... .......... ........ 17

6.1 INTRODUCTION ......................................................................................................................................... 17 6.2 LARGE NON-WOOD INDUSTRIES ...................................................................................................................... 18 6.3 WOOD RESIDUE GENERATING INDUSTRIES ..................................................................................................... 19 6.4 TREE FARMS ................................................................................................................................................... 19 6.5

SUMMARY AND CONCLUSIONS ............................................................................................................ 20

7

SITE SELECTION .......................................................................................................................................... 21

7.1 INTRODUCTION ......................................................................................................................................... 21

8

TECHNOLOGY ASSESSMENT ................................................................................................................... 24

8.1 INTRODUCTION ......................................................................................................................................... 24 8.2 SELECTED TECHNOLOGY ....................................................................................................................... 25

9 PROJECT ECONOMIC VIABILITY ASSESSMENT ........... .......... ........... .......... ........... .......... ........... ...... 34

9.1 ESTIMATED CAPITAL COSTS ........................................................................................................................... 34 9.2 SENSITIVITY CASES ................................................................................................................................. 35

10 PERMITTING AND ENVIRONMENT ASSESSMENT .......... .......... .......... ........... ........... .......... ........... .... 37

11

SOCIO ECONOMIC IMPACTS .......... .......... ........... .......... ........... .......... ........... ........... .......... ........... .......... . 39

12

LONG TERM SUSTAINABILITY AND REPLICABILITY............... .......... ........... .......... ........... .......... ... 41

12.1

KLMSS COUNCIL RESOLUTION PLAN ............................................................................................. 41

12.2 PROJECT IMPLEMENTATION FUNDING .......................................................................................... 41 12.3 ANTICIPATED BENEFITS AND ASSESSMENT PLAN ...................................................................... 41 12.4 TRAINING, OPERATION AND MAINTENANCE PLANS .................................................................. 41


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13

CONCLUSIONS .............................................................................................................................................. 42

14 APPENDICES .................................................................................................................................................. 44

14.1

APPENDIX A - BIOMASS FUEL SURVEY I NSTRUMENT ................................................................................ 45


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1 EXECUTIVE SUMMARY

1.1 INTRODUCTION

As directed by the British Columbia Provincial Government in its BC Energy Plan: A Vision forClean Energy Leadership, BC Hydro is implementing a Standing Offer Program to encourage thedevelopment of small and clean energy projects throughout the Province of British Columbia. Theprogram is a process to purchase energy from small projects with a nameplate capacity greater than0.05 megawatts but not more than 10 megawatts (MW). In order to respond to BC Hydro’s StandingOffer Program call for power, Kelly Lake Métis Settlement Society (KLMSS) is proposing to build a 10megawatts alternative green and clean energy biomass generation facility near the Kelly Lakecommunity which is approximately 120 kilometers Southeast of Hudson’s Hope, B.C.

The transmission and sales to Alberta through Alberta Electric System Operator (AESO) and under

the System Access Service (SAS) Agreements is briefly considered but not pursued in this study asthe power purchase agreement with AESO would generally not qualify as a long term powerpurchase agreement as the sale price for electricity is based on spot pricing and is viewed as highrisk by most financial institutions.

The goals of the KLMSS are to develop economically viable energy production facilities using readilyavailable renewable biomass fuel sources at an acceptable cost per kilowatt hour ($/kWh), to providenew and meaningful permanent employment, retain and expand existing employment (logging) andprovide revenues for both producers and sellers of the finished product. The biomass power projectwill create urgently needed aboriginal employment opportunities and revenues, while providing

energy in an environmentally sound manner. In addition to helping to meet area power demands, theprojects will help reduce dependency on imported non-renewable energy sources.

The project is of enormous importance to the KLMSS in terms of its economic diversification and jobcreation. It will also be important to the region as a whole in moving toward requiring increasedemphasis on renewable power and there is a projected shortage of power generation in an area ofincreasing population and business growth. Moreover, we believe that this project will increaseservice reliability in the area.

1.2 BACKGROUND

The Kelly Lake Métis Settlement Society, besides being a recognized Aboriginal Community is a not-for-profit Society registered in British Columbia under the Societies Act since April 26, 2002.Registration No. S-44582. The Society is in good standing and continues to meet all annual filingrequirements.


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An economically-depressed area, Kelly Lake is seen as the only Métis community with historicalroots in B.C. having lived in the area since the early 1800s – membership of which approximately 138adults live in the settlement with their children.

KLMSS has focused on addressing governance and socio-economic issues facing the communityand has continued to identify economic opportunities through various relationships and joint ventures.KLMSS has contracted services in mining, road upgrading, provision of dust control system,provision of camp services, and underground piping. To diversify the local economy and createemployment opportunities that take advantage of technological advances and utilize resources thatare currently underutilized, KLMSS is proposing to build an alternative energy project. The Kelly Lakealternate energy project will generate 10 MW of electricity – enough to power approximately 7500homes - using biomass from pine beetle killed fibre, agriculture and wood residue from forestryoperations as well as other sources.

Historically, KLMSS continue to hold to their traditional visions of community renaissance and values.Sustainable, efficient resource development requires KLMSS to create an environment in which thewhole community can thrive and prosper. The continued protection and utilization of aboriginal rightsof sovereignty and self determination are key strategic elements to achieve a higher quality of life.

Currently, BC Hydro is implementing a Standing Offer Program to encourage the development ofsmall and clean energy projects throughout the Province of British Columbia. The program is aprocess to purchase energy from small projects with a nameplate capacity greater than 0.05megawatts (MW) but not more than 10 MW. To further diversify its economic base, KLMSS begins toexamine the possibility of developing a 10 MW electrical generation facility on its traditional lands.

This study includes an assessment of available biomass fuel by KLMSS to satisfy the fuelrequirements of a 10 MW power plant on a continuous basis, technology assessment, site selection,economics viability given the foreseeable fuel and generation costs for renewable energy generation.

This effort has identified a potentially viable biomass-fueled renewable energy project using proventechnology and available and proximate fuel supplies on a 40 acres site on KLMSS traditionalterrority.

Based on a 10 MW plant selling electricity to the grid at 90% net of the plant capacity, the plant wouldproduce 72,000 MW hours (MWH) per year. At electricity sale prices of $120.00 to 150.00/MWHwould indicate annual gross revenues of $8.64 to $10.80 Million in its first full year of operation,

respectively. At biomass fuel price at $15 per ton, the project suggests earnings before income tax,depreciation and amortization (EBITDA) of $ 4.61 and $6.77 Million for the first full year, respectively.

Our assessment has shown that project viability is highly dependent upon resolution of two issues:


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• Acceptable costs and interconnection agreement with BC Hydro High Voltage (HV) system,and suitable site location close to BC Hydro substation

•

Acceptable Purchase price for generated renewable power by BC Hydro.Because of these factors, it is clear that in order to keep the transmission cost low, the power plantsite has to be close to BC Hydro grid. The ideal plant site should be no more than 15 km with BCHydro substation in Dawson Creek Substation (2552 DAW). KLMSS will have to consider purchasingor leasing a power plant site of 40 acres. And then there is the additional cost of $ 3.75 million for the15 km HV transmission line to the BC Hydro interconnection point.

The current anticipated purchase price as offered by BC Hydro for green and renewable power willprobably not support the costs of about 15 km of HV transmission connection. As plans were beingdiscussed with the gas transmission industries to improve the global green house gas emissions by

converting their gas-fired turbines for the gas transmission compressors to electricity drives, it will benecessary for the gas industries to construct HV transmission lines to service these compressors. Itwill possibility for KLMSS to negotiate with the local gas industries to connect to the gas industries’new HV transmission line.

While almost all of North-Eastern British Columbia’s electricity is produced from coal, and/or fossilfuels, the Province clearly has a sustainable supply of wood/biomass fuel to supply relatively smallgenerating facilities such as the KLMSS is pursuing.

Potential biomass fuel sources considered include:• Wood waste from gas operation, gas transmission line clearings;•

Wood waste from sawmills and wood products manufacturing operations;• Biomass from pine beetle killed fibre;• Wood waste from logging operations;• Forest management waste (such as fire prevention thinning, bio fuel); and,• Local land owners, tree farming.

An annual estimated amount of 130,000 green tons of biomass fuel is required to fuel a 10 MW powerplant. The amount of biomass fuel within the KLMSS traditional territory that the potential biomasssources including gas industries, forestry, plantation, sawmill residues and pine beetle kill as well asfrom agriculture and other sources will be sufficient to fuel the Power Plant for more than 20 years.The local gas transmission industries have pledged support of fuel contributions to KLMSS in the

amount of 15,000 m3

from each of their annual clearings.We have identified the wood waste streams from most of the above potential sources that sell for $10to 15 per ton. In addition, biomass material can be sourced from land owners or tree farms for wholetree chipping operations. Another possibility for supplying biomass to the proposed facilities is tocollect logging residue. Waste residue (treetops, limbs, stumps and brush) comprises about 20% of


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the volume of trees now logged for the paper, wood, and wood products industry. This wood waste isnot only unsightly; they pose a great threat for forest fire. For power production, the logging residuewould be cut to transportable size, or chipped at the landing or trucked to the generation project sitefor further hogging. The advantages of using logging residues are that it is currently not utilized,relatively abundant, will clean-up logging cut areas, and produce “green and clean” electrical power.Working to establish an aboriginal collection operation is a possibility. Annual usage of a 10 MWplant would total 130,000 tons in a 50 km radius of the proposed plant site.

Another option to supply biomass fuel to the energy facility is for KLMSS to obtain it from localfarmers and land owners. Such farms and land owners have been contacted and fuel purchasearrangements are being pursued to ensure long term fuel supply is established. Many land ownerswere contacted and currently letters of intent with local land owners (more than 240 acres producingbiomass fuel for $5 per m3 or about $10 per ton) have been signed.

1.3 PROJECT DESCRIPTION

A 10 MW biomass fuelled power plant is a state-of-the art facility and will utilize approximately 16.8green tons per hour (t/hr) of biomass fuel to produce approximately 43 tons/hr (94,000 lbs/hr) of 4.24MPa (600 psig) of high pressure steam at 400°C (750°F) and up to 10 megawatts (MW) of electricity.The biomass fuel for the project will be primarily collected from the local area. The biomass fuel for thePower Plant will amount to about 130,000 green tons per year. The biomass fuel would be transported tothe Power Plant by shuttle trucks. It is anticipated that there would be ten truck trips per day to haulthe wood residue to the proposed facility.

The state-of-the-art Power Plant will consist of a biomass fuelled steam boiler capable of generating highpressure and temperature steam from biomass primarily collected in the local area, a 10 MW designcapacity condensing steam turbine generator, a cooling tower, a biomass fuel preparation, storage andreclamation system, an ash handling system, and electrostatic precipitator, an electricaldistribution/switch system, and a boiler/ steam turbine/ DCS control/ and administration building.

Superheated high pressure steam generated from a biomass fuelled boiler is expanded in a condensingsteam turbine-generator to produce electrical energy. A water cooled condenser will be equipped withthe condensing turbine to maximize the negative condensing pressure. The cooling water to the surfacecondenser will be in a closed loop and heat from the condenser will be ejected in the cooling tower insidethe closed loop. Make-up water to handle the evaporative loss totaling less than 6.3 l/sec (100 USGPM)will be provided from Kelly Lake or well water. Electricity produced will be sold to B.C. Hydro.

The Power Plant cooling system will consist of a steam surface condenser connected to the steamturbine condenser, cooling tower, circulating water pumps, and auxiliary cooling system pumps. Thecooling water will be pumped out of the cooling tower basin by the circulating water pumps, through thecondenser and back to the cooling tower. Cooling water for the generator air coolers, lube oil coolers


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and other auxiliary equipment will be pumped from the circulating water line through the equipment andreturned to the circulating water line by the auxiliary cooling system pumps.

The Power Plant air quality impacts will be minimized by providing the following emission controlmeasures:

• Particulate from boiler flue gas will be removed in a mechanical (multiclone) dust collector and amultiple-field electrostatic precipitator before the flue gas is released to the stack for dispersion.

• The boiler will be equipped with low NOx burners as required and combustion air controlinstrumentation designed to minimize the emissions of nitrogen oxides (NOx) and carbonmonoxides (CO).

• The equipment for removing, storage and disposing ash produced by the boiler will be enclosedand sealed to prevent escape of dusty ash. The ash will also be wetted and conditioned prior to

disposal to eliminate dusting during hauling and landfill.• The cooling towers will be equipped with mist eliminators designed to reduce mist droplets whichmay get entrained in the plume.

The Power Plant liquid effluent impacts will be minimized by providing the following measures:

• Plant waste water from the facility would be limited to either reverse osmosis (RO) reject ordemineralizers effluent which will be treated to neutralize acids and caustics and boilerblowdown and to remove oil, grease and suspended solids prior to discharge.

• Chemical storage tanks and turbine lube oil tanks will be curbed to catch potential spills ofchemicals and lube oil.

The Power Plant will conduct safe solid and hazardous waste management practices to minimize air,water and soil contamination. These practices will include:

• Ash disposal in an approved landfill or return to the ground as fertilizer;• Use of non-toxic corrosion inhibiting chemicals in the cooling and boiler feedwater treatment

systems;• Collection and recycling of lube oils and chemical containers; and• Segregation of industrial wastes from laboratory and other plant operations for storage and

regular disposal to an authorized waste treatment facility.

The Power Plant will be designed and operated to meet all current noise control guidelines andregulations. Noise control measures will be incorporated into the overall facility layout, equipmentspecification and selection, and operating practices.

Design Criteria MW Plant


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Electrical Energy Output at Full Condensing 10 MWGenerator Power Factor Design 0.85Generator Electrical Voltage: 4,160 or 11,500 VoltsMaximum Steam Flow (Maximum Continuous Rating): 43 t/hr (94,000 lbs/hr) @ 4.24 MPa (600 psig)Operating Pressure: 4.24 MPa (600 psig)Operating Temperature: 500 ° C (750 ° F)Feedwater Temperature at Economizer Inlet: 108 ° C (228 ° F)Saturated Steam Carryover Moisture: 0.5%Fuel Flow: 16.8 t/hr

The proposed power plant site of approximately 40 acres is located Block B DL 340 on KLMSStraditional land adjacent to the Alberta border. Its proximity to Kelly Lake will ensure sufficient watersupply to operate a power plant of this capacity.

Presently, access to High Voltage (HV) BC Transmission system from the Kelly Lake area is notreadily available. KLMSS Biomass Team plans to meet with the local gas transmission industries toarrange HV transmission access via the local gas transmission industries planned HV transmissionsystem and subsequently interconnect to the existing BC Transmission HV network.

The biomass power plant will be built with conventional, proven technology and fuelled with availablebiomass materials from the vicinity of the proposed sites. As such, the facility is expected to beoperational full time except for reasonable downtime for maintenance.

The operation of the plant will create about 24 long term high paying skilled jobs including a licensedfirst class steam engineer, in addition to the construction jobs, and will provide additional opportunitiesto increase production and long term employment. The electrical generating facility will be staffed bylicensed full time operators, 24-hours per day, and 7-days per week. It is expected that many localpeople will have the skills and experience or will be trained to fill these roles. It is also anticipated thatthere will be many spin-off jobs created in the community as a result of the 24 permanent jobs from theelectrical generating facility.

In addition to the handling of the biomass/wood wastes in the electrical generating facility, thecollection of the waste wood will employ a number of new full time employees. This will includeequipment operators, truck drivers and management support for those functions. The supplier(possibly an aboriginal business venture) will require new trucks and other equipment, which will also

benefit the local and regional economy.

Capital Costs associated with a 10 MW biomass power project have been estimated at $26. 5 millionas follows:


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• Project Development Costs: $ 1.5 million• Land : $ 0.5 million•

Permits: $ 0.4 million• Turbines: $ 5.0 million• Boiler & Combustion Equipment: $ 9.0 million• Fuel Preparation Equipment: $ 1.5 million• Buildings: $ 1.0 million• Ancillary Equipment: $ 2.5 million• Electrical and Substation: $ 2.5 million• Construction: $ 2.6 million

1.4 BUSINESS PLAN / NEXT STEPS

KLMSS has proposed a 10 MW biomass-fired project that appears to be potentially viable.Technology, location, fuel supply, markets, financing and transmission issues have each beenaddressed to the point where KLMSS is confident that biomass-fired power projects are “do-able” inthe region. It is clear that the energy project satisfies the requirements of BC Hydro’s small powerproject standing offer in the region for the renewable based energy power supply in the near future.The proposed facility can serve the anticipated increased demand in the region and reduce thedependency of fossil fuel. For the project to be implemented, two things must be accomplished:• Acceptable costs and interconnection agreement with BC Transmission High Voltage (HV)

system, and• Acceptable purchase price for generated renewable power.

1.4.1 Secure Biomass Fuel Supply

In order to be reasonably assured of a predictable, attractive fuel price and a reliable sustainablesupply mechanism, KLMSS has begun negotiating long term biomass fuel supply agreements in theform of letters of intent with the following industries:

• BP• Encana• Enbridge

Our analysis to date demonstrates that there is enough wood waste at an affordable price from local

area sawmills, natural gas and transmission operations, biomass from pine beetle kill, as well as fromlogging operations. In addition, there is an ample supply of forest biomass material from land ownersand tree farms that will provide the volumes sufficient to fully support a 10 MW biomass power plantover the life of the project.


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1.4.2 Determining Electricity Sale Price

Utilities across the country have implemented or plan to provide “green pricing” programs thatinvolve wind, biomass and other renewable technologies. The payment price offered by BC Hydro forenergy delivered under the Standing Offer Program is determined by the location of the Project andthe year, month and time of day the energy is delivered. An additional payment for EnvironmentalAttributes may apply. It is important to note that without an acceptable resolution for interconnectionto the BC Transmission HV system with the local gas transmission industries, the additional costs ofthe 15 km of HV transmission line from the proposed power plant to the BC Transmission HV systemhave not been included in the project costs and may have to be negotiated with B C Hydro.

1.4.3 Project Implementation

The project implementation phase includes the following activities:

• Negotiate long term fuel supply agreements• Negotiate energy purchase agreement with BC Hydro• Transmission and interconnectivity coordination• Environmental permitting• Negotiate Engineering, Procurement and Construction (EPC) agreement for the construction

of the power plant


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2 PROJECT OVERVIEW

KLMSS has decided that it will explore the feasibility of developing a 10 MW biomass fired powergeneration facility fueled by locally-available biomass. In areas adjacent to the KLMSS traditionallands, there is a substantial amount of biomass fuel potentially available, including:

• Wood waste from gas operation and transmission line clearings;• Wood waste from sawmills and wood products manufacturing operations;• Biomass from pine beetle kill;• Wood waste from logging operations;• Forest management waste (such as fire prevention thinning, bio fuel); and,• Tree farming.

This study included an assessment of available biomass fuel from KLMSS, technology assessment,site selection, economics feasibility given the foreseeable fuel and generation costs, as well ascreating meaningful employment opportunities for the members in the Kelly Lake Traditional Territory.KLMSS is interested in “Green Business” development and sustainable economic development thatpromotes a better balance between environmental protection, jobs, and wealth distribution. KLMSSeconomic development goals are closely aligned with a “Renewable and Clean Energy Developmenton Traditional Lands” project. Therefore, KLMSS is very interested in development of a biomass powerproject on traditional lands. The feasibility study looked at a site for a renewable energy power plantwithin the settlement community.

2.1 COMMUNITY PROFILE – KELLY LAKE MÉTIS SETTLEMENT SOCIETY

KLMSS is a not-for-profit Society registered in British Columbia under the Societies Act April 26, 2002.KLMSS is governed by corporate bylaws that define corporate and community governance. KLMSShas maintained their society in good standing and continues to meet all annual filing requirements.

In February of 2006 KLMSS members ratified their first official Constitution at their Annual GeneralMeeting. The ratification of the Constitution truly marked a significant step to ensure a truerepresentative and democratic governance structure for all residents of Kelly Lake. The Constitutiondefined 4 year terms for elected leadership, accountability measures for membership, processes to

address issues, and definition for membership.

Presently KLMSS leadership continues to design strategies to ensure proper governance is designedfor the community. In fact KLMSS recognizes that good governance leads to the ability to address thesocio-economic issues facing the community; health, education, housing, and economic development.


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KLMSS leadership continues to lobby both the Federal and Provincial Governments in this era of a“New Relationship” that has stressed the commitments of both governments to address socio-economic issues in all Aboriginal communities.

KLMSS consists of a group of Métis members that have a historic connection to the traditional territorysince the early 1800s. The Métis community of Kelly Lake is often described as the only historicallyconnected Métis community with historical roots in B.C. According to current leadership, thecommunity has up to 350 people, approximately 138 of which are accredited members of KLMSS andtheir children living in the settlement. Another 56 accredited members (and their children) are livingoutside of KLMSS Traditional Territory. The remaining Métis are not accredited members, but look tothe KLMSS for leadership. The population fluctuates as members move in and out of the communityaccording to employment opportunities and family needs (health, education, housing, etc.).

KLMSS has focused on addressing governance and socio-economic issues facing the community.KLMSS has continued to identify contracting opportunities through various relationships and jointventures. KLMSS has contracted services in mining, road upgrading, provision of dust control system,provision of camp services, and underground piping.

KLMSS leadership has stated that they want to create meaningful employment opportunities for theirmembers in the Kelly Lake Traditional Territory. In spite of tremendous resources in the territory, thereare few opportunities for employment in Kelly Lake and people often are forced to leave thecommunity for work or commute to work, thereby putting a strain on families..

The average KLMSS member income in 2005 was estimated at $20,000 to $25,000 per family perannum. KLMSS is confident that secure employment and a successful housing initiative will ensurestrong community health for the Métis people in Kelly Lake.

Population Demographics

KLMSS represents Métis members as defined in the KLMSS bylaws and constitution. In February2009 KLMSS membership totaled 138:

• 62 Men• 76 Women

KLMSS continues to review socio-economic needs for the Métis members by identifying informationregarding the following areas:

1. Unemployment Rate: 36% (n=28)


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2. Education Levela. Elementary: 47% (n=30)b. High School: 33% (n=30)c. College: 17% (n=30)d. University: 3% (n=30)

3. Percentage of KLMSS residents in Kelly Lake: 86% (n=28)4. The average age of Kelly Lake members is: 35 (n=24)

2.2 COMMUNITY BENEFITS

Using locally available biomass fuel directly supports the community, economic, social, and culturalgoals of KLMSS. A biomass fuel power project leverages community assets and resources and helpsprovide the foundation for future sustainable development. Among KLMSS’s significant assets andresources are its political status, cultural identity, legal rights and unique opportunities for economicdevelopment as aboriginal entities.

KLMSS will continue to hold to their traditional visions of community renaissance and values.Sustainable, efficient resource development requires the aboriginal nation to support the individual bycreating an environment in which the whole community can thrive and prosper.


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3 OBJECTIVES

The goals of the KLMSS are to develop economically viable energy production facilities using readilyavailable renewable biomass fuel sources at an acceptable cost per kilowatt hour ($/kWh), to providenew and meaningful permanent employment, retain and expand existing employment (logging) andprovide revenues for both producers and sellers of the finished product. The biomass power projectwill create urgently needed aboriginal employment opportunities and revenues, while providing energyin an environmentally sound manner. In addition to helping to meet area power demands, the projectwill help reduce dependency on imported non-renewable energy sources.

The biomass power project is of enormous importance to KLMSS in terms of its economicdiversification and job creation. It will also be important to the region as there is an increasedemphasis on renewable power within the whole country, and there is a projected shortage of powergeneration in an area of increasing population and business growth. Moreover, we believe that thisproject can serve as a catalyst for creating an energy-producing region which has many advantages:

• It will increase service reliability utilizing existing BC Transmission HV system, and• It will create much needed economic development opportunities and diversification in the

region.


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4 METHOD OF IMPLEMENTATION

4.1 IMPLEMENTATION

The Initial Plan was to conduct the project in four distinct phases:• Project Initiation• Phase 1 – Conceptual Project Definition• Phase 2 – Detailed Project Definition• Phase 3 – Project Implementation

Specific tasks for each phase are outlined below.Project Initiation

• Complete Project Feasibility Study• Conduct project initiation meeting with the Ministry of Energy, Mines, and Petroleum

Resources representative of Renewable Energy Development and representative of ElectricPolicy Generation and Regulation and meeting with BC Hydro and BC Transmissionrepresentatives on the 10 MW standing offer program

Phase 1 – Conceptual Project Definition

• Preliminary assessment of biomass fuels supply (sources, volumes, pricing, fuel value, currentuses)

• Candidate technology assessment (equipment manufacturers, commercial viability,experience, capacity, fuel compatibility, impacts, site requirements, preliminary economicsscreening)

• Preparation of detailed site selection criteria (proximity to interconnect points, proximity to fuelsource, transportation infrastructure, utility infrastructure, environmental considerations, landand buffer requirements, etc.)

Phase 2 – Detailed Project Definition

• Fuel supply strategy• Project structure alternatives strategy (ownership definition, i.e. Joint Ventures (JV) or

Partnership arrangements, operation and staffing responsibility, etc)• Technology Screening / Technology Selection


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• Site Selection• Permit planning

Phase 3 – Project Implementation

The project implementation phase includes the following activities:• Negotiate power purchase agreement• Negotiate fuel supply agreements• Negotiate equipment purchase agreements• Transmission and connectivity filings and coordination• Environmental permitting•

Engineering, Procurement and Construction contracts

4.2 WORK PROCEDURES

All work will be performed by bonded EPC Contractors in Phase 3 in accordance and with approvalby the JV or Partnership arrangements.


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5 BC HYDRO 10 MW POWER PURCHASE STANDING OFFER

5.1 INTRODUCTION

As directed by the British Columbia Provincial Government in its BC Energy Plan: A Vision forClean Energy Leadership, BC Hydro is implementing a Standing Offer Program to encourage thedevelopment of small and clean energy projects throughout the Province of British Columbia. Theprogram is a process to purchase energy from small projects with a nameplate capacity greater than0.05 megawatts but not more than 10 megawatts (MW). In order to answer BC Hydro’s StandingOffer Program call for power, Kelly Lake Métis Settlement Society (KLMSS) is proposing to build a 10megawatts alternative green and clean energy biomass generation facility near the Kelly Lakecommunity which is approximately 120 kilometers Southeast of Hudson’s Hope, B.C.

The transmission and sales to Alberta through Alberta Electric System Operator (AESO) and underthe System Access Service (SAS) Agreements is briefly considered but not pursued in this study asthe power purchase agreement with AESO would generally not qualify as a long term powerpurchase agreement as the sale price for electricity is based on spot pricing and is viewed as highrisk by most financial institutions.

The goals of the KLMSS are to develop economically viable energy production facilities using readilyavailable renewable biomass fuel sources at an acceptable cost per kilowatt hour ($/kWh), to providenew and meaningful permanent employment, retain and expand existing employment (logging) andprovide revenues for both producers and sellers of the finished product. The biomass power project

will create urgently needed aboriginal employment opportunities and revenues, while providingenergy in an environmentally sound manner. In addition to helping to meet area power demands, theprojects will help reduce dependency on imported non-renewable energy sources.

The proposed biomass power plant site will be on KLMSS traditional territory and is to be within 5 to15 km of the assigned electric service territory of BC Hydro Dawson Creek Substation (2552 DAW).

5.2 KLMSS SMALL RENEWABLE ADVANTAGE

While utility companies generally do not resist renewable energy in principle, in reality the argumentexists since some “renewable” are generally unreliable (i.e. wind and solar) and tend to raise the

average of embedded generation costs, and ultimately the price of power to consumers.

While most of BC Hydro’s electricity is produced from hydro, almost all of North-Eastern BritishColumbia’s electricity is purchased from Alberta and is produced from coal, and/or fossil fuels, the


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province clearly has a sustainable supply of wood/biomass fuel to supply relatively small generatingfacilities such as KLMSS is pursuing.

5.3 BC HYDRO STANDING OFFER

In previous years, BC Hydro has issued a number of calls for power with varying requirements of theprojects and participants. While these calls were successful in obtaining power for the province fromboth small and large sources, both BC Hydro and the provincial government were concerned that theadministrative burden of participation in the calls was too great for small developers.

A Standing Offer Program has been designed to simplify the process, the contract and itsadministration, and to decrease the costs of participation for developers while remaining cost-effective for the BC Hydro ratepayer. The Program was developed to meet the need identified by theEnergy Plan and embodies its policy and principles.

The Program is currently limited to Proven Generation Technologies, with the exception of nuclearpower.

The Standing Offer Program Rules explain Program details including eligibility requirements,application process and the Standard Form Electricity Purchase Agreement (“Standard Form EPA”)terms and is on the BC Hydro Website.


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6 BIOMASS FUELS ASSESSMENT

6.1 INTRODUCTION

This project investigated wood residue market dynamics within 50 km radius of possible procurementareas for wood energy projects at the plant site.

Project electricity can be generated using all or any one of the following renewable fuel types:

The first is the use of “hog/chipped” wood residue abundantly available from large industries in theKelly Lake area, such as natural gas line transmission clearings and coal mining. The three local gasindustries, BP, Encana, and Enbridge, have significant volumes of wood residues accumulated from

their operations. There is currently no market for these wood residues, which has a high BTU outputwhen burned. Currently, open fire is the only solution in reducing the volume of the accumulatedwood residues. This supply is abundant for the foreseeable future and is widely available near theproposed project site. Chipping could be conducted at the landing and chips delivered to the plantsite in “walking bed” trailers.

The second renewable energy fuel source is through existing wood residue suppliers. Generators ofwood residue were contacted to determine volumes of wood residue currently generated, the natureof that residue and existing markets within which the residue is traded. These confidential interviewsalso included prices received for the wood residue, where it was sold and how far (and at what cost)it has to be transported.

Possible sources of wood residue were investigated including:

• Primary forest products industries,• Secondary forest products industries, and• Loggers.

"The pine beetle kill", as it’s known to British Columbians, refers to the millions of hectares of treesleft for dead in the wake of the voracious insect. Forestry officials in Canada’s westernmost provinceestimate the volume of wood lost to be around 620 million cubic metres - roughly equivalent to 15million logging truck loads.

According to a B.C. Ministry of Forests report, roughly half of the province’s pine trees are nowdestroyed by the bug, with the most extensive damage occurring in the central Canadian Rockies,where two-thirds of the region’s lodgepole pine forests have been transformed into a sea of orangeneedles. The harvesting of local pine beetle kill would be an ideal fuel source for generating power.


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Local pine beetle kills are currently underutilized with very little or no market, they have a high BTUoutput when burned, are abundant and widely available near the proposed project site. Hogging andchipping would be conducted at the landing and hogged or chipped fuel delivered to the plant site by

“walking bed” trailers.

In addition, producing biomass fuel from tree farms was also investigated as a long-term source ofsupply. As the project proceeded, the focus of the investigation evolved with more emphasis placedon those sources of material which seemed most promising. Both aspen and poplar are fast growingtrees in the area. The use of “hogged or chipped” local aspen and poplar would be an idealrenewable fuel source for generating power. Both aspen and poplar are currently underutilized withlittle or no market, they have a high BTU output when burned, are abundant for the foreseeablefuture and are widely available near the proposed project site. Hogging and chipping would beconducted at the landing and hogged or chipped fuel delivered to the plant site by “walking bed”trailers. Tree farms can provide biomass fuel from whole-trees. Chippers can reduce entire trees to

chips. These chips are sold for boiler fuel. A number of the land owners were contacted and some(over 240 acres on traditional land) have agreed to provide biomass fuel for $5 per m3 or $ 10/tonand have signed letters of intent and were included as part of the study.

The other renewable energy fuel source is “biomass fuel” clearing of logging residue (tree tops,limbs, stumps and brush). This waste residue comprises about 30% of the volume of trees nowlogged for the paper, wood, and wood products industries. This logging residue is unsightly andposes a greater risk for forest fire.

For power production the logging residue would be collected and cut to transportable size and theneither chipped or trucked to the generation project site for hogging.

The advantages of using this biomass fuel are that:

• it is currently not fully utilized,• it is abundant,• it will clean-up logging cut areas, and• it will provide new jobs to the area

6.2 LARGE NON-WOOD INDUSTRIES

Three large non-wood industries and their available wood residue were studied in this report. Thestudy primarily accounts for transportation costs, which are dependent on the distances from thegeneration of the material to the power plant. These industries are:

• BP


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• Enbridge• Encana

It is estimated that over 15,000 m3 per year of wood residues and wastes will be generated from eachof the gas transmission industries clearing. The local gas industries have pledged to support theKLMSS project with an annual fuel contribution in an amount no less than 15,000 m3 from each oftheir clearings.

6.3 WOOD RESIDUE GENERATING INDUSTRIES

Wood residue is not a high value resource and consequently is most economically traded in a fairlylocal market area which minimizes transportation costs. In the areas closest to the proposed projectsite, large gas industries and forest products industries are the largest, readily accessible source ofwood residue.

Three types of industries were surveyed.

• Primary gas industries generate a large volume of wood waste from clearings.• Primary and Integrated industries generally generate the highest volumes of wood waste.• Secondary Industries use lumber and other intermediate wood products to produce final

consumer products.

Any residue that is not used in products is either burnt in open fires or disposed of in landfills. Anyenergy facility would have to be competing for supply within these markets. Within all wood residuemarkets, the generators of the wood residue are price takers. For wood related industries, generation

of the wood residue is a normal part of the production process and must be disposed of, theindustries will send the material to any purchaser who pays the highest price after transportationcosts are deducted. The one exception is in the case of an industry selling both their chips and theirhog fuel to a pulp mill. In this case, producers are reluctant to separate these two waste streams.

6.4 TREE FARMS

In speaking with the land owners, it also became clear that more attention should be devoted to thispossible source of supply.

Several land owners were contacted. And some are willing to sign letters of intent and have quoted a

price of $5 per m3 ($10 per ton).

To offer some perspective on the annual fuel requirements of the 10 MW power plant, it wouldrequire approximately 130,000 tons of fuel. It would require about 10 trucks per day with a truck that


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holds 90 yards, to satisfy the fuel requirement. Therefore, supplying a 10 MW facility with biomassfuel from land owners or tree farms is very feasible over the long term.

Fuel assumptions

• Mixed species at 44 % moisture content (wet basis).• Specific gravity = .50• Btu/oven dry pound = 8,600• Average Btu/green pound = (8,600 X .56) = 4,716• Daily volume of fuel required for a 10 MW plant = 16.8 green tons/hour X 24 hours = 403.2

tons

6.5 SUMMARY AND CONCLUSIONS

There appears to be sufficient wood residue produced by the local large gas industries and forestproducts industries to fuel a 10 MW energy facility. The emergence of the pine beetle kill creates theopportunity to examine the possible use of selective logging of the beetle kill as a source of fuel. Thiscould create sustainable employment within KLMSS and help thin out the pine beetle kill and furtherinvestigation of costs and production efficiencies seems warranted.

Tree farms also offer an opportunity for production of biomass fuels on traditional lands. Such farmsare, at present, being managed by land owners and there is little or no market for the fibre produced.Given the current market, such farms are an economically viable option as a source of supply.


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7 SITE SELECTION

7.1 INTRODUCTION

The original proposed power plant site, Block B DL 340, of approximately 40 acres is located onKLMSS traditional land adjacent to the Alberta boarder. Its close proximity to the highway will ensureease of transportation. Also its proximity to Kelly Lake will ensure sufficient water supply to operate a10 MW power plant. Total water requirement for the power plant will require about 6.3 l/sec (100USGPM). It should be noted that it is over 65 km to the nearest BC Hydro HV connection. Afterpreliminary discussions with BC Hydro, it is deemed unsuitable because of the high cost of newtransmission and upgrading of the existing BC Hydro HV transmission system not to mention the timeand cost for environmental impact study that is required for any new transmission systems.

It is decided that an alternate site to be found within 15 km away from the nearest connection point tothe BC Transmission high voltage transmission system at the Dawson Creek Substation (2552 DAW)to export the electricity is desirable based on lowest costs and acceptable to BC Hydro. A 15 kmthree phase - HV transmission line may have to be constructed from the plant to the BCTransmission HV connection location.

The following criteria were used for site selection:

Land

• preference for land held in trust•

at least 40 acres in size, sufficient area for over a month of fuel storage• relatively level, rectangular parcel• no industrial land use prohibitions• close proximity to biomass fuel


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Original Proposed Site

Utilities and Support Services

Reasonable access to gas, water, sewer, wastewater discharge. It is about 15 km to the nearestconnection location to the BC Transmission HV systems.

Transportation

Good highway access with minimal seasonal weight restrictions.


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Labour

The plant will employ 24 total full time employees (operators, material managers, and maintenance).

Environment and Community

• Surrounding land use compatible with industrial development (sensitivity to truck traffic, noise,visual impacts)

• Buffering adequate for residential and recreational use areas• Community receptive to industrial development• Anticipated air emission and wastewater discharge permits available for prospective site


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8 TECHNOLOGY ASSESSMENT

8.1 INTRODUCTIONIt was determined that the chosen technology would have to be practical and successfully utilized inother similar situations in order to provide a reasonable assurance of commercial viability.Technologies that are currently on the cutting edge of technology for similar situations were reviewedand eliminated. The selected biomass project would have to have a reasonable chance of economicsuccess in order to justify the investment of the KLMSS’s resources.

Two primary techniques are utilized in the conversion of biomass fuel to power. These are:• Direct Combustion• Pyrolysis/Gasification

Direct Combustion

Direct Combustion is a proven and the most extensively used technology for existing biomasssystems. Additionally, the existing successful direct combustion facilities primarily utilize lumber andwood waste, where the fuel is generated as a result of other industrial activity such as hog fuel, woodfurniture scraps, etc. These materials are produced as the result of some manufacturing process onthe raw lumber used onsite; such as cutting, trimming, sanding, etc. If not used as a source of fuel,the material would have to be handled as waste and disposal costs would be incurred. Thus, the costof fuel is significantly reduced as opposed to purchasing biomass from a forest setting.

Pyrolysis/Gasification

Gasification is the process of converting biomass into a combustible gas. Any carbon-containingmaterial can be converted into a gas composed primarily of carbon monoxide and hydrogen. Thisgas can then be utilized as a source of fuel such as may be used to drive a combined cycle gasturbine.

The gasification process controls the temperature and pressure to convert biomass into low ormedium BTU gas in a reducing, or oxygen starved, environment. Gasification has been used foralmost two hundred years. Early gasification development utilized coal as the source of fuel to makea gas referred to as town gas. Today, there are many research and test projects using wood wastes,forest cuttings, and manufacturing wastes.

The process generally has two steps: pyrolysis and char conversion. The pyrolysis step releasesvolatile components from the fuel when it is heated in an environment where the air in the reaction istypically much less than that found in the fire box of a boiler. The temperature is generally maintainedbetween 400 °C and 600 °C to release a complex gas called syngas, producer gas, woodgas, etc.


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Gasification appears to offer a promising future; as systems are developed and improved. A greatdeal of research has been conducted in the recent past, but overall cost to create power compared tocontemporary power sources is still not practical. However, due to the currently unproven commercialnature, these units would not be applicable for the KLMSS needs.

8.2 SELECTED TECHNOLOGY

It was determined that the proven and practical methods for today are direct combustion. A directcombustion electrical power generation unit of 10 MW would be appropriate for the conditions in theKLMSS region. The amount of biomass to support the system is available, local regional needswould consume the electrical load, and existing distribution systems could handle, or be readilymodified to handle the electrical load.

Facility Description

A 10 MW biomass fuelled power plant will utilize approximately 16.8 green tons per hour (t/hr) ofbiomass fuel to produce approximately 43 t/hr (94,000 lbs/hr) of 4.24 MPa (600 psig) of high pressuresteam at 400 °C (750 °F) and up to 10 megawatts (MW) of electricity. The biomass fuel for theproject will be primarily collected from the local area. The biomass fuel for the Power Plant will amountto about 130,000 green tons per year. The biomass fuel would be transported to the Power Plant byshuttle trucks.

The state-of-the-art Power Plant will consist of a biomass fuelled steam boiler capable of generating highpressure and temperature steam from biomass primarily collected in the local area, a 10 MW designcapacity condensing steam turbine generator, a cooling tower, a biomass fuel preparation, storage andreclamation system, an ash handling system, and electrostatic precipitator, an electricaldistribution/switch system, and a boiler/ steam turbine/ DCS control/ and administration building.

Superheated high pressure steam generated from a biomass fuelled boiler is expanded in a condensingsteam turbine-generator to produce electrical energy. A water cooled condenser will be equipped withthe condensing turbine to maximize the negative condensing pressure. The cooling water to the surfacecondenser will be in a closed loop and heat from the condenser will be ejected in the cooling tower insidethe closed loop. Make-up water to handle the evaporative and blow down losses in the amount of 6.3l/sec (100 USGPM) will be provided for from well water. Electricity produced will be sold to B.C. Hydro.

The Power Plant cooling system will consist of a steam surface condenser connected to the steam

turbine condenser, cooling tower, circulating water pumps, and auxiliary cooling system pumps. Thecooling water will be pumped out of the cooling tower basin by the circulating water pumps, through thecondenser and back to the cooling tower. Cooling water for the generator air coolers, lube oil coolersand other auxiliary equipment will be pumped from the circulating water line through the equipment andreturned to the circulating water line by the auxiliary cooling system pumps.


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The Power Plant air quality impacts will be minimized by providing the following emission controlmeasures:

• Particulate from boiler flue gas will be removed in a mechanical (multiclone) dust collector and amultiple-field electrostatic precipitator before the flue gas is released to the stack for dispersion.

• The boiler will be equipped with low NOx burners if and as required and combustion air controlinstrumentation designed to minimize the emissions of nitrogen oxides (NOx) and carbonmonoxides (CO).

• The equipment for removing, storage and disposing ash produced by the boiler will be enclosedand sealed to prevent escape of dusty ash. The ash will also be wetted and conditioned prior todisposal to eliminate dusting during hauling and landfill.

• The cooling towers will be equipped with mist eliminators designed to reduce mist droplets whichmay get entrained in the plume.

The Power Plant liquid effluent impacts will be minimized by providing the following measures:

• Plant waste water will be treated to neutralize acids and caustics and to remove oil, grease andsuspended solids prior to discharge.

• Chemical storage tanks and turbine lube oil tanks will be curbed to catch potential spills ofchemicals and lube oil.

The Power Plant will conduct safe solid and hazardous waste management practices to minimize air,water and soil contamination. These practices will include:

• Ash disposal in an approved landfill;

• Use of non-toxic corrosion inhibiting chemicals in the cooling and boiler feedwater treatmentsystems;

• Collection and recycling of lube oils and chemical containers; and

• Segregation of industrial wastes from laboratory and other plant operations for storage andregular disposal to an authorized waste treatment facility.

The Power Plant will be designed and operated to meet all current noise control guidelines andregulations. Noise control measures will be incorporated into the overall facility layout, equipmentspecification and selection, and operating practices.


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Design Criteria MW Plant

Electrical Energy Output at Full Condensing 10 MWGenerator Power Factor Design 0.85Generator Electrical Voltage: 4,160 or 11,500 VoltsMaximum Steam Flow (Maximum Continuous Rating): 43 t/hr (94,000 lbs/hr) @ 4.24 MPa (600 psig)Operating Pressure: 4.24 MPa (600 psig)Operating Temperature: 500 ° C (750 ° F)Feedwater Temperature at Economizer Inlet: 108 ° C (228 ° F)Saturated Steam Carryover Moisture: 0.5%Fuel Flow: 16.8 t/hr


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KLMSS – 10 MW Steam and Power Balance


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Specific Performance Guarantees

Specific performance guarantees will be required. These will be based upon the following when firingat 100% of continuous maximum steam flow:

Steam Output 4.24 MPa (600 psig)Steam Temperature (Temp.) 400 °C + 5 °C (750 °F + 10 °F)Steam Flow 43 t/h (94,000 lbs/hr)Steam Purity 0.5%Gas Stack Temperature 350°FNOX Emissions mg/Nm3

CO Emissions mg/Nm3 Particulate Emissions


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Carbon 51.0%Hydrogen 6.0%Nitrogen 0.3%Oxygen 40.7%Sulphur


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Steam Generation System

The hot combustion gases will enter into the steam generator (boiler). The steam boiler will besupplied in accordance with the American Society of Mechanical Engineers (ASME) Boiler andPressure Vessel Code – Section 1, and will remove heat from the gases as the gas flows through theunit.

After exiting the boiler, the hot gases will enter an economizer which further removes thermal energyfrom the gas stream and transfers the heat into the inlet water. The gases then enter a flue gassystem.

Flue Gas System

The cooled flue gases discharged from the economizer will enter a mechanical (multiclone) dustcollector where the course ash particulates are removed from the gas stream and collected within ahopper. The flue gases will then be pulled by an induced draft fan into an electrostatic precipitator(ESP) where the fine particulates are collected in the ESP hoppers prior to exiting the stack. Acontinuous emission monitor (CEM) will be provided at the stack outlet to monitor the flue gas exitconditions on a continuous basis.

Electrical Generation System

The high pressure (HP) and superheated steam from the boiler outlet will be connected through HPpiping to a steam turbine inlet throttle valve of a 15 MW condensing steam turbine-generator. The HPsteam will be allowed to expand through the turbine and exhaust into a surface condenser to anegative pressure to convert the mechanical energy into electricity. The condenser is a surfacecondenser and cooling of the surface condenser is by cooling water which is interconnected with acooling tower in a closed loop.

A 11,760 kVA generator and exciter will be self-regulated and generate electricity. The generatoroutput in full extraction/condensing operation will be approximately 10 MW. The generator willautomatically synchronize with the utility bus. The functions and data required for operation andmonitoring the turbine generator will be interconnected with the main plant control system.

Ash Disposal System

The ash from the combustion of the wood residue fuel will come from three locations throughout theplant:

• the combustion chamber (coarse ash),• the boiler and economizer hopper (fine ash), and


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• the flue gas emission control system, mechanical (multiclone) dust collector hoppers and theESP hoppers (fine ash).

The coarse ash may be handled separately from the fine ash to a bunker with front end loaders usedfor removal of the coarse ash and the two sources of fine ash may be connected together within onefinal transfer conveyor which conveys the ash into a standard dumpster for removal by truck.

Final disposition of the ash has not been determined, but it is likely to be a local municipal orcommercial landfill authorized to handle such materials or return to land owners as fertilizers.

Technical and Documentation Supply

Initial design specifications calls for the EPC contractor to provide all of the Engineering,Procurement and Construction as required for the power plant.

A complete set of design drawings and documents are to be provided as follows:

• Foundation Outline and Loadings Diagrams• General Arrangement Drawings• Piping Drawings• Electrical One Line and Three Line Diagrams• Electrical Drawings• Control Logic Diagrams• Hydraulic Logic Diagrams• Equipment Data Sheets

• Process and Control Diagrams• Instrument Data Sheets• ASME Code Component Drawings• Breeching Drawings• Insulation and Lagging Requirements• Detailed Project Schedule

On site staff training will be provided by the EPC contractor both prior to start up and during the startup and commissioning activities of the plant. The total training period will be approximately thirty (30)eight-hour days, of which five (5) days will be in-class discussions of equipment covering operationaltheory and maintenance of the equipment.

Schedule

An approximate schedule of activities is:


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• Equipment should be on site within 40 weeks from approval date of the engineeringsubmittals.

• The erection of the equipment should be completed within 180 days after initial equipment

delivery.• The commission of the plant will require an additional 21 days to complete.• All equipment will be scheduled for just-in-time delivery consistent with field erection

scheduling. This minimizes field handling and aids in an efficient construction process.

The following is a summary of preliminary project durations:

TIMELINE FOR PLANNING, CONSTRUCTION & PRODUCTION

Tasks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Procurement of Equip

Site Prep., Found. & BuildingEngineering

Equipment Installation

Piping Installation

Commissioning and Start-up

The actual schedule will depend on a number of factors including engineering and fabricationschedules at the time of order, scope of equipment, and weather conditions during construction.

Durations Months


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9 PROJECT ECONOMIC VIABILITY ASSESSMENT

Economic analysis and power production cost analysis was conducted to evaluate economic viability

of a 10 MW plant at the KLMSS.

Cases were modeled to assess project viability with respect to the following:

• Capital Costs• Project Financing Terms (interest rate, term)• Fuel Costs• Electricity Sale Price

The following assumptions were made for the economic modeling:

• On-line factor – 91.3%• Plant operation labour force• Total investment - $26. 5 Million• 15% equity financing• 85% debt financing

Based on a 10 MW plant selling electricity to the grid at 90% net of the plant capacity, the plant wouldproduce 72,000 MW hours (MWH) per year. At electricity purchase prices of $120.00 to 150.00/MWHwould indicate annual gross revenues of $8.64 to $10.80 Million in its first full year of operation,respectively. At biomass fuel price at $15 per ton, the project suggests earnings before income tax,

depreciation and amortization (EBITDA) of $ 4.61 and $6.77 Million for the first full year, respectively.Our assessment has shown that project viability is highly dependent upon resolution of two issues:

• Acceptable costs and interconnection agreement with BC Transmission High Voltage (HV)system, and

• Purchase price for generated renewable power.

9.1 ESTIMATED CAPITAL COSTS

Capital costs associated with a 10 MW project have been estimated at $26. 5 million as follows:

• Project Development Costs: $ 1.5 million• Land : $ 0.5 million• Permits: $ 0.4 million• Turbines: $ 5.0 million


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• Boiler & Combustion Equipment: $ 9.0 million• Fuel Preparation Equipment: $ 1.5 million• Buildings: $ 1.0 million•

Ancillary Equipment: $ 2.5 million• Electrical and Substation: $ 2.5 million• Construction: $ 2.6 million

9.2 SENSITIVITY CASESProject economics relating to financing terms, capital costs, fuel costs, power costs, operating andmaintenance, etc. were tested. Input to the financial models were varied to ascertain the key factors.The variables included;

• Fuel Costs• Capital Costs

• Financing costs and length of service• Potential sources of grants to reduce financing requirements• KLMSS equity position and expected return on investment• Revenue potential based on sales price of electricity produced

Fuel Costs

The data collected in this report suggests that current fuel costs from readily available local sourcesare in the range of $15 to 20/ton. Fuel costs are the overwhelming variable in the economics, and canaffect the viability of the project. It is anticipated that KLMSS has the ability to stay within its targetprice range.

Capital Costs

The capital costs collected in this report reflect the costs generally required to construct a newbiomass power plant in North America. The additional costs for constructing a 16 km three phase HVtransmission line to the nearest connection point of BC Transmission lines have not been included inthis report. The HV transmission line costs are the overwhelming variable in the economics, andalmost disproportionately affect the viability of the project. Significant assistance from the gastransmission industries will be required to minimize the costs of the HV transmission lines and arenecessary for project viability.

Project Financing Sensitivity Costs

We considered project financing sensitivity cases where debt financing was as low as 4 ½ % and ashigh as 8 % and for a period varying from as short as 8 years to as long as 10 years. While longerfinancing periods and lower rates certainly showed positive impacts on the project, they were not as


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important as obtaining fuel costs at a rate less than what is currently available or the additional costsof the 15 km HV transmission line.

Revenue Potential

Various sale prices for produced electricity were modeled. This included on-peak and off-peak pricing,as well as a blended price. The blended price range was obtained through analysis of potential marketconditions. It is found that the required sales price is most sensitive to fuel cost and capital costs.


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10 PERMITTING AND ENVIRONMENT ASSESSMENT

Based on the current design criteria, the project is not anticipated to trigger an assessment under theBC Environmental Assessment Act (BCEAA), as it does not have a generating capacity over 50 MW,and will likely not involve the construction of more than 40 km of 500 kV (or greater) transmission line(Reviewable Projects Regulation, BC Reg. 370/2002). Further, the project is not expected to triggeran environmental assessment under the Canadian Environmental Assessment Act (CEAA). CEAAapplies where the federal government has decision-making authority on a project (e.g., is aproponent; provides funding; provides federal land; or provides a licence, permit, or approval listed inthe Law List Regulations).

Common environmental assessment triggers under CEAA include:• Approval under the Navigable Waters Protection Act, should the project or transmission line

cross a navigable waterway• Authorization under the Fisheries Act, should the project or transmission line affect fish

habitat.

The environmental approvals will be confirmed once more information on the project is available. Inthe absence of a requirement for a provincial or federal-level environmental assessment, thepermitting process will be limited to a permit under the Environmental Management Act, as theproject involves an activity listed in Schedule 1 of the Waste Discharge Regulation (burning orincineration of wood residue). Additional authorizations, such as Water Act approvals, may berequired based on site-specific conditions and project activities.

Tasks required for completion of a waste discharge permit application are summarized below. Giventhe preliminary nature of the available project information, this is meant to provide an overview anddoes not constitute an exhaustive list of tasks.

• Development of a Terms of Reference (TOR) outlining the proposed scope of the technicalreport for the project. This is completed to ensure the application meets agency requirementsfor permitting the project and to allow an efficient review process.

• Pre-application meeting with Ministry of Environment (MOE) to discuss the proposed TOR andestablish the scope of the assessment. This could be completed via conference call tominimize costs. The MOE would also provide guidance regarding agency referral andconsultation requirements for the project.

• Notification of the public, agencies, and other stakeholders, as recommended by the MOErepresentative and prescribed under the Public Notification Regulation (BC Reg.202/94)including posting and publishing the application. Consultation with First Nations would beundertaken as directed by MOE and in accordance with the Provincial Policy for Consultation


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with First Nations. A consultation report would be prepared in accordance with MOE guidancefor the application package.

• Site visit to confirm environmental and archaeological conditions on the site as summarized

from the environmental baseline information. A registered professional biologist andarchaeologist would complete the site visit to gather information for the technical report.• Completion of an Archaeological Overview Assessment to identify lands within the proposed

development area with potential to contain archaeological sites or areas significant to FirstNations; identify potential conflicts between known archaeological sites, known traditional landuse sites, and proposed project development activities; and provide recommendations foradditional archaeological investigations as required.

• Air quality modeling and assessment in accordance with Guideline for Emissions from Wood-Fired Electrical Power Generation (Environmental Protection Division 2008), and Guidelinesfor Air Quality Dispersion Modeling in British Columbia (MOE 2008). The assessment willinclude the following tasks: regional ambient background and study area definition,

climatology analysis, dispersion modelling, and technical reporting.• Preparation of a technical report in accordance with Guidance on Applications for PermitsUnder the Environmental Management Act – Technical Assessment. Major report componentswould include a project description, environmental baseline information, impact assessment(including air emissions modelling, human health and ecological risk assessment, and anarchaeological overview assessment), and a proposed discharge monitoring program.

• Compilation of the application package for submission to MOE. This includes standard forms,maps, and plans, as well as the technical and consultation reports for the project.


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11 SOCIO ECONOMIC IMPACTS

An economically-depressed area, Kelly Lake is seen as the only Métis community with historical

roots in B.C. having lived in the area since the early 1800s – membership of which approximately 138adults live in the settlement with their children.

The intent and purpose of the project is to generate financial support and continue the diversificationof the KLMSS’s economy and revenue in order to increase, enhance, and improve the quality of lifeof KLMSS community members. KLMSS is proposing to develop an economically viable energyproduction facility using readily available, acceptably priced renewable biomass fuel sources. Theproject would provide new meaningful permanent employment, retain and expand existingemployment (logging), and provide revenues for both producers and sellers of the finished product.KLMSS’s goals are those of economic stability, economic growth, and economic development.

KLMSS has focused on addressing governance and socio-economic issues facing the communityand has continued to identify economic opportunities through various relationships and joint ventures.KLMSS has contracted services in mining, road upgrading, provision of dust control system,provision of camp services, and underground piping. To diversify the local economy and createemployment opportunities that take advantage of technological advances and utilize resources thatare currently underutilized, KLMSS is proposing to build an alternative energy project. The Kelly Lakealternate energy project will generate 10MW of electricity – enough to power approximately 7500homes - using biomass from pine beetle killed fibre, agriculture and wood residue from forestryoperations as well as other sources.

There is a need to provide permanent full-time employment opportunities in a diversified local

aboriginal economy. The project would contribute to KLMSS employment and income. This projectwould have a positive effect on KLMSS economics, stimulating employment by creating constructionand long-term jobs, while stabilizing the existing logging operations in the area. In addition, theproject would provide career paths to some KLMSS people who choose to pursue them.

The estimated cost of a proposed 10 MW biomass facility is $ 26.5 million. It is anticipated thatconstruction would cost $ 2.6 million. A significant portion of that cost would be for labour toconstruct the facility. We anticipate approximately 35 full-time equivalent construction jobs during theanticipated 1-year construction period. Many of these jobs would be filled by people who live in ortravel to the area. The increased purchases from area suppliers and added income generated in thevicinity of the project would certainly have a beneficial impact on the economy.

The project is expected to create long-term employment, in addition to the construction jobs, andwould also help sustain the long-term employees at the biomass facility. The biomass facility wouldbe staffed 24 hours per day, 7 days per week. It is anticipated that the facility will require four shiftsof about 24 -26 trained personnel in order to cover the weekends and holidays shifts.


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Operators will require sophisticated training in operating the mechanical and electrical componentsof the facility and be licensed under BC Safety Branch. Additionally, the facility will serve as atraining ground for KLMSS members to be licensed power plant operators.

The construction and operation workforce associated with the project is expected to consist ofpeople who already live in or travel to the area, with tribal members receiving a preference, and assuch is not expected to place a strain on local housing.

The project would utilize approximately 16.8 tons per hour of wood residue expected to be harvestedfrom within a 50-km radius of the project site. This would be a beneficial addition to the localeconomy and provide additional employment in the logging industry.

The collection of the wood waste, in addition to providing environmental benefits and reducing theusage of fossil fuel, will also employ a number of new full time employees. These employees willwork for the wood waste suppliers. It is estimated that this will include loggers, truck drivers andmanagement support for those functions. In addition, the supplier will require new trucks and otherequipment, which will also benefit the local and regional economy. The actual number of jobscreated has not been estimated. This may also provide the impetus for new business developmentopportunities for KLMSS community. Economic developers generally use a multiplier of 4-7 jobs forevery base manufacturing job created.

The effect on the level of provincial and local sales, property and income taxes cannot definitively beestimated. Additionally, the wages and benefits to the power plant operators are estimated to be inthe range of $ 50,000 to $100,000 per year depending on the levels of the operators’ certificate.

The benefits to the KLMSS communities, both on the community and in the surroundingcommunities, are substantial. The development of the Biomass Project would provide stable sourcesof new revenue and increase employment opportunities for KLMSS. The revenue generated wouldbe used for badly needed improvements in KLMSS health care, housing, education, social services,community development, human resources, other services, and necessary infrastructure.

The project is clearly in the best interests of KLMSS. The project will provide new jobs and economicactivity to KLMSS and the communities surrounding the settlement.


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12 LONG TERM SUSTAINABILITY AND REPLICABILITY

12.1 KLMSS COUNCIL RESOLUTION PLAN

KLMSS Council fully supports implementation of a biomass fired power generation project on KLMSStraditional lands. A project of this type is consistent with KLMSS objectives to diversify their economicbase and create economic opportunities. It is also consistent with the KLMSS’s concerns regardingenvironmental stewardship and maintaining cultural values. KLMSS Council has been fully informed ofdevelopments that have occurred throughout the feasibility study period.

12.2 PROJECT IMPLEMENTATION FUNDING

Project implementation funding will be anticipated to be comprised of a 15% contribution by KLMSSwith the remaining 85% provided through supplier’s credit. The facility will either be operated by

KLMSS or contracted to an operating and maintenance contractor, who will also be the plant operator.

12.3 ANTICIPATED BENEFITS AND ASSESSMENT PLAN

The potential benefits to KLMSS and its members include meaningful employment, revenues, reliableenergy, diversification of economic base and infrastructure improvement. A biomass fuelled powerplant is a good fit environmentally, socially, economically, and culturally.

12.4 TRAINING, OPERATION AND MAINTENANCE PLANS

Training, Operation and Maintenance plan details will be determined once financing and operation

plans have been established. We anticipate the equipment vendors being heavily involved.


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13 CONCLUSIONS

This effort has identified a potentially viable biomass-fueled renewable energy project using proven

technology, and readily available and proximate fuel supplies for a 10 MW biomass fired powergeneration facility located near Kelly Lake, on KLMSS traditional terrority.

Based on a 10 MW plant selling electricity to the grid at 90% net of the plant capacity, the plant wouldproduce 72,000 MW hours (MWH) per year. At electricity purchase prices of $120.00 to 150.00/MWHwould indicate annual gross revenues of $8.64 to $10.80 Million in its first full year of operation,respectively. At biomass fuel price at $15 per ton, the project suggests earnings before income tax,depreciation and amortization (EBITDA) of $ 4.61 and $6.77 Million for the first full year, respectively.

Our assessment has shown that project viability is highly dependent upon resolution of two issues:• Acceptable costs and interconnection agreement with BC Transmission system, and• Acceptable purchase price for generated renewable power.

Because of these factors, it is clear that in order to keep the transmission cost low, the power plant sitehas to be close to BC Hydro grid. The ideal plant site should be no more than 15 kms with BC Hydrosubstation in Dawson Creek Substation (2552 DAW). KLMSS will have to consider purchasing orleasing a power plant site of 40 acres. And then there is the additional cost of $ 3.75 million for the 15km HV transmission line to the BC Hydro interconnection point.

The current anticipated purchase price as offered by BC Hydro for green and renewable power willprobably not support the costs of about 15 km of HV transmission connection. As plans were beingdiscussed with the gas transmission industries to improve the global green house gas emissions by

converting their gas-fired turbines for the gas transmission compressors to electricity drives, it will benecessary for the gas industries to construct HV transmission lines to service these compressors. Itwill possibility for KLMSS to negotiate with the local gas industries to connect to the gas industries’new HV transmission line.

While over 85-percent of British Columbia’s electricity is produced from hydro, the province clearly hasa sustainable supply of biomass fuel to supply a relatively small generating facility such as KLMSS ispursuing.

Our analysis to date demonstrates that there is an ample supply of fuel material and numerous largeindustrial operations in the area. In order for KLMSS to be comfortable investing in biomass-fired

power plants, it must be assured of a predictable, attractive fuel price and a reliable, sustainablesupply mechanism. Potentially viable fuel supply alternatives that have been identified include:

• Contracting with locals for delivery of biomass (pine beetle kill and gas transmission siteclearings) to on-site hog fuel storage.


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• Contracting with locals for delivery of logging residue (treetops, limbs, etc.) to on-site chippingoperations.

• Developing a KLMSS venture to supply logging residue to on-site chipping operations or

deliver chips directly to the plant site.• Contracting local landowners (tree farms) for delivery of wood chips to on-site chip storage.

2 10 mw biomass plant feasibility study final

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